Robinhood lets investors trade stocks commission-free

Next disruption by all of Silicon Valley: Wall Street.

A new startup aims to convince Millennials to get into the stock market by making it cheaper and easier to buy stocks. Robinhood, a new mobile brokerage that launched its iOS app today, allows users to buy US-listed stocks without paying commission, a cost that typically costs individual investors $7-10 per month. transaction.

The app’s sleek interface allows users to buy stocks, track stock performance, and keep tabs on their overall portfolio. Users don’t even have to maintain a minimum account balance, a common requirement of similar stock exchange services.

“People in our age group weren’t exposed to what we consider to be a pretty useful tool for building your wealth,” says Robinhood co-founder Vlad Tenev. He and co-founder Baiju Bhatt launched Robinhood in beta for a few thousand users earlier this year. Already half a million people have signed up to apply for the app, indicating a strong appetite for cheaper trades. These users will start being onboarded to the app today, and newcomers can download the app to join the waitlist and view different actions.

The company, which has raised $16 million in venture capital from backers like Andreessen Horowitz and Google Ventures, plans to make money by letting investors trade on margin (essentially making loans to allow clients to buy additional shares).

Whether or not young investors really need a service that lets them buy stocks “as fast as you can call an Uber,” as Bhatt puts it, is an open question. Most active stock pickers fail to outperform the overall stock market. In the first 9 months of 2014, only 9.3% of actively managed mutual funds outperformed the S&P 500, according to the the wall street journal – and these funds are managed by people whose job it is to choose stocks well.

Tenev argues that stock picking is a good way for young people to learn how to invest. “It makes a lot of sense for a newbie investor who is an early adopter of technology and learns about companies using their products and services,” he says.

This advice goes against a lot of collective investment wisdom, including that of famed businessman Warren Buffet. But for those who are still convinced they can beat the market and would like to try it out for less, Robinhood will soon be available on Android and desktop as well.

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